An employer cannot wrongfully breach a provision of an employment contract that is favorable to the employee (such as reducing his wages without his consent and without contractual authority to do so) an then go into a court of equity to secure, by injunction, the enforcement of another provision favorable to it.”
Both employers and employees are wondering how COVID-19 will affect the litigation of the non-compete disputes around the country and whether the courts will be more or less likely to enforce such agreements in light of the nationwide health emergency and the drastic economic downturn.
Many companies in Texas have non-competition agreements with their employees, but not all companies enforce them. Some companies will sue the departing employees for violating non-compete agreements, even thought such agreement may not be valid under Texas laws. Others, will not bother with enforcement even though they have valid agreements on hand. The reality is that the validity of a non-compete agreement is only one factor in a company’s decision whether to enforce it.
In Texas, the reason for termination of employment – whether it was for cause, without cause, a layoff, a reduction in force, or any other reason – does not affect the enforceability of a non-compete agreement. Therefore, employers should not assume that non-competition agreements are no longer enforceable and must carefully approach enforcement of such agreements against departing employees as well as the hiring of new employees who may be still bound by non-competition agreements with their former employers.
Sometimes, a business can be excused from performing under a contract due to a force majeure or an “Act of God” provision in that agreement. However, given that COVID 19 is a new phenomenon, there is no clear law on (1) whether COVID 19 qualifies as an “Act of God” or a force majeure event and (2) many contracts will need to be interpreted to determine whether their particular force majeure clauses encompass COVID 19. Needless to say, the parties may disagreed about the interpretation.
Over the next several days, I will provide a break down of the new employment laws and guidances issued by various government agencies that Texas employers should know about when dealing with COVID 19. If you have any follow up questions, please reach out to me at Leiza.Dolghih@lewisbrisbois.com.